under authority from the State, if it saw fit to do so. These are positions which must be conceded. No one has ever doubted them.

This unlimited right of the State to charge or to authorize others to charge toll, freight or fare for transportation on its roads, canals and railroads, arises from the simple fact that they are its own works, or constructed under its authority. It gives them being. It has a right to exact compensation for their use. It has a discretion as to the amount of that compensation. That discretion is a legislative--a sovereign-discretion, and in its very nature is unrestricted and uncontrolled. The security of the public against any abuse of this discretion resides in the responsibility to the public of those who, for the time being, are officially invested with it. In this respect it is like all other legislative power when not controlled by specific constitutional provisions, and the courts cannot presume that it will be exercised detrimentally.

So long, therefore, as it is conceded (as it seems to us it must be) that the power to charge for transportation, and the amount of the charge, are absolutely within the control of the State, how can it matter what is done with the money, whether it goes to the State or to the stockholders of a private corporation? As before said, the State could have built the road itself and charged any rate it chose, and could thus have filled the coffers of its treasury without being questioned therefor. How does the case differ, in a constitutional point of view, when it authorizes its private citizens to build the road and reserves for its own use a portion of the earnings? We are unable to see any distinction between the two cases. In our judgment there is no solid distinction. If the State, as a consideration of the franchise, had stipulated that it should have all the passenger money, and that the corporation should have only the freight for the transportation of merchandise, and the corporation had agreed to those terms, it would have been the same thing. It is simply the exercise by the State of absolute control over its own property and prerogatives.

This exercise of power on the part of a State is very different from the imposition of a tax or duty upon the movements or operations of commerce between the States. Such an imposition, whether relating to persons or goods, we have decided the States cannot make, because it would be a regulation of commerce between the States in a matter in which uniformity is essential to the rights of all and, therefore, requiring the exclusive legislation of Congress. Crandall v. Nevada, 6 Wall., 42 [73 U. S., XVIII., 746]; Freight Tax case, 15 Wall., 232, 279 [82 U. S., XXI., 146, 163]. It is a tax because of the transportation, and is, therefore, virtually a tax on the transportation, and not in any sense a compensation therefor, or for the franchises enjoyed by the corporation that performs it.

It is often difficult to draw the line between the power of the State and the prohibitions of the Constitution. Whilst it is commonly said that the State has absolute control over the corporations of its own creation, and may impose upon them such conditions as it pleases; and like control over its own territory, highways

and bridges, and may impose such exactions for their use as it sees fit; on the other hand, it is conceded that it cannot regulate or impede interstate commerce, nor discriminate between its own citizens and those of other States, prejudicially to the latter. The problem is to reconcile the two propositions; and as the latter arises from the provisions of the Constitution of the United States, and is, therefore, paramount, the question is practically reduced to this: what amounts to a regulation of commerce between the States, or to a discrimination against the citizens of other States? This is often difficult to determine. In view, however, of the very plenary powers which a State has always been conceded to have over its own territory, its highways, its franchises and its corporations, we cannot regard the stipulation in question as amounting to either of these uncon stitutional Acts. It is not within the category of such Acts. It may, incidentally, affect transportation, it is true; but so does every burden or tax imposed on corporations or persons engaged in that business. Such burdens, however, are imposed diverso intuitu, and in the exercise of an undoubted power. The State is conceded to possess the power to tax its corporations; and yet every tax imposed on a carrier corporation affects more or less the charges it is compelled to make upon its customers. So, the State has an undoubted power to exact a bonus for the grant of a franchise, payable in advance or in futuro; and yet that bonus will necessarily affect the charge upon the public which the donee of the franchise will be obliged to impose. The stipulated payment in this case, indeed, is nothing more nor less than a bonus; and so long as the rates of transportation are entirely discretionary with the States, such a stipulation is clearly within their reserved pow ers.

Of course, the question will be asked, and pertinently asked: has the public no remedy against exorbitant fares and freights exacted by state lines of transportation? We cannot entirely shut our eyes to the argument ab incon venienti. But it may also be asked: has the public any remedy against exorbitant fares and freights exacted by steamship lines at sea? Maritime transportation is almost as exclusively monopolized by them as land transportation is by the railroads. In their case the only relief found is in the existence or fear of competition. The same kind of relief should avail in reference to land transportation.

Whether, in addition to this, Congress, under the power to establish post-roads, to regulate commerce with foreign nations, and among the several States, and to provide for the common defense and general welfare, has authority to establish and facilitate the means of communication between the different parts of the country, and thus to counteract the apprehended impediments referred to, is a question which has exercised the profoundest minds of the country. This power was formerly exercised in the construction of the Cumberland road and other similar works. It has more recently been exercised, though mostly on national territory, in the establishment of railroad communica tion with the Pacific coast. But is to be hoped that no occasion will ever arise to call for any general exercise of such a power, if it exists. Ít

can hardly be supposed that individual States, as far as they have reserved or still possess the power to interfere, will be so regardless of their own interests as to allow an obstructive policy to prevail. If, however, state institutions should so combine or become so consolidated and powerful as, under cover of irrevocable franchises already granted, to acquire absolute control over the transportation of the country and should exercise it injuriously to the public interest, every constitutional power of Congress would undoubtedly be invoked for relief. Some of the States are so situated as to put it in their power, or that of their transportation lines, to interpose formidable obstacles to the free movement of commerce of the country: Should any such system of exactions be established in these States, as materially to impede the passage of produce, merchandise or travel, from one part of the country to another, it is hardly to be supposed that the case is a casus omissus in the Constitution. Commercially, this is but one country, and intercourse between all its parts should be as free as due compensation to the carrier interest will allow. This is demanded by the "general welfare," and is dictated by the spirit of the Constitution at least. Any local interference with it will demand from the National Legislature the exercise of all the just powers with which it is clothed.

But whether the power to afford relief from onerous exactions for transportation does or does not exist in the General Government, we are bound to sustain the constitutional powers and prerogatives of the States, as well as those of the United States, whenever they are brought before us for adjudication, no matter what may be the consequences. And, in the case before us, we are of opinion that these powers have not been transcended.

The judgment of the Court of Appeals of Maryland is affirmed.

Mr. Justice Miller, dissenting:

I am of opinion that the Statute of Maryland requiring the Railroad Company to pay into the Treasury of the State one fifth of the amount received by it from passengers on the branch of the road between Baltimore and Washington, confined as it is exclusively to passengers on that branch of the road, was intended to raise a revenue for the State from all persons coming to Washington by rail, and had that effect for twenty-five years, and that the statute is, therefore, void within the principle laid down by this court in Crandall v. Nevada, 6 Wall., 35 [73 U. S., XVIII., 745].

Cited-59 Iowa, 153; 44 Am. Rep., 675.

HARRY FOX ET AL., Piffs. in Err.,

v.

EDWIN W. GARDNER, Assignee of NICHOLAS YOUNG, a Bankrupt.

(See S. C., 21 Wall., 475–480.)

Assignee in bankruptcy, when may recover debt -illegal contract.

1. Where one who gave drafts on another to his creditors in payment of his debts was insolvent,

and such insolvency was known to the drawees and with intent to give preferences forbidden by the to such creditors, and such drafts were given by him Bankrupt Act, and were accepted by the drawees in fraud of that Act, the assignee in bankruptcy may recover of the drawees the amount they owed the insolvent at the time such drafts were drawn, although they have accepted such drafts and agreed to pay the same to the creditors in whose favor the drafts were drawn.

2. Such acceptances were a part of an illegal contract, and no action will lie upon them in favor of those making claim to them. When the drawees pay to the assignee the debt due from them to the bankrupt, they will pay it to the party entitled to receive it, and will have discharged their liability. [No. 227.] Argued Apr. 15, 1875. Decided May 3, 1875.

IN ERROR to the Circuit Court of the United sin.

States for the Western District of Wiscon

The case is fully stated in the opinion of the court.

Messrs. B. G. Caulfield and R. T. Merrick, for plaintiffs in error:

The doctrine of the court below is contrary to common justice and the established principles of law.

Adler v. Fenton, 24 How., 407 (65 U. S., XVI., 696); Simpson v. Dall, 3 Wall., 460 (70 U. S., XVIII., 265).

Mr. W. F. Vilas, for defendant in error:

The novation or contract of substitution of one creditor for another, is a discharge or legal payment only when the contract is valid and binding upon the first creditor.

The assignee is now such first creditor, by representation; and his representation being not alone of the bankrupt, but of his creditors, he has rights superior to those of the bankrupt. He may attack fraudulent preferences, which the bankrupt could not. A contract in favor of a creditor may be binding on the bankrupt, and void as to his assignee.

It is not binding on his assignee, because it was a contract to accomplish a result prohibited by law. It was a fraudulent agreement to the injury of the bankrupt's general creditors, and it is their injury which gives the assignee his right of defeat to it.

Contracts made to accomplish a fraudulent or an illegal purpose, are in law obligatory on neither party.

Randall v. Howard, 2 Black, 585 (67 U. S., XVII., 269); Hannay v. Eve, 3 Cranch, 242; Kennett v. Chambers, 14 How., 38; Bank of U. S. v. Owens, 2 Pet., 527; Woodworth v. Bennett 43 N. Y., 273; Foote v. Emerson, 10 Vt., 338 Griswold v. Waddington, 16 Johns., 438; Fouler v. Scully, 72 Penn., 456.

The Bankrupt Act, sec. 14, expressly vests in the assignee title to all property conveyed by the bankrupt in favor of his creditors. A debt against another is as much property as a movable chattel, and if conveyed in fraud of creditors may, of course, be recovered at their instance. The Act vests the title in the assignee, upon the assignment made to him.

Mr. Justice Hunt delivered the opinion of the court:

The plaintiffs in error, under the partnership name of Fox & Howard, were railroad contractors on a portion of the Chicago and Northwestern Railway. The defendant in error is the assignee in bankruptcy of one Nicholas

Young, a sub-contractor under them.

The contract was made October 4, 1870; the work was finished about November 24. 1870; and full payment became due on December 15, 1870. Subsequently, Young was adjudged a bankrupt in pursuance of a petition in bankruptcy filed against him on the 7th of January, 1871; and on the 12th of September, 1872, the defendant in error, as his assignee, instituted the proceedings which are now before this court for review, to compel the payment of an alleged balance due from the plaintiffs in error to Young.

Under the rulings of the district court, which were affirmed by the circuit court, the jury rendered a verdict in favor of the assignee for the sum of $4,691.47, of which the principal items were, $3,692.80, claimed by the plaintiffs in error to have been paid by them to the use of Young before the filing of the petition in bankruptcy, in pursuance of acceptances by them of Young's drafts to that amount, and $502.20 of orders drawn on Young by various small creditors in favor of one Burroughs, and as is claimed, with Young's consent, taken by the plaintiffs and charged up against Young, and credited to Burroughs, before the institution of the proceedings in bankruptcy. The main controversy in the case is as to the validity of these payments under the provisions of the Bankrupt Law of the United States.

To meet these claims the assignee proved that when the bankrupt gave the drafts, which are claimed to operate as payments, he was insolv ent, and that such insolvency was known to Fox & Howard, and to the creditors to whom the drafts were given; that they were given by the bankrupt with intent to afford preferences forbidden by the Bankrupt Act, and that they were accepted by Fox & Howard in fraud of that Act.

The contention of the plaintiffs in error is found in the following extract from the brief of their counsel:

That the court below was mistaken in its construction of the 35th section of the Bankrupt Act. That section does not authorize suits by an assignee against debtors of the bankrupt who have discharged their debts to him, or paid money to other persons for his use, within the period of four or six months specified in the Act. It only authorizes suits against such creditors of the bankrupt as have fraudulently received such payments. Only the parties benefited by a fraudulent preference under the Bankrupt Act are liable to the assignee.

The doctrine of the district court, it is said, leads to the most disastrous consequences, for if a debtor cannot respect the orders of a man in embarrassed circumstances except at his peril, then he will necessarily precipitate the condition of insolvency and bankruptcy, which a different course might have prevented. It is believed that this doctriue is contrary to common justice and the established principles of law."

The 35th section of the Bankrupt Act provides that a transaction like the one we have presented "Shall be void, and the assignee may recover the property or the value of it from the person so receiving it or so to be benefited."

The language of the statute authorizing the assignee "To recover the property, or the value

|of it, from the person so receiving it or so to be benefited," does not create a qualification or limitation of power. There is no implication that the party paying is not also liable. The words are those of caution merely, and give the assignee no power that he would not possess if they had been omitted from the statute. In the present case, the property or value attempted to be transferred belonged originally to the bankrupt. On the adjudication of bankruptcy, the possession and ownership of the same were transferred to the assignee. Sec. 14. The attempted transfer by the bankrupt was fraudulent and void. It follows, logically, that the debtor yet holds it for the assignee, and that the assignee may sue him for its recovery. See, Bolander v. Gentry, 36 Cal., 105; Hanson v. Herrick, 100 Mass., 323.

Upon principle, there would seem to be scarcely room for doubt upon the point before us. The pretended payment, or transfer or substitution, by the debtor of the bankrupt, was in fraud of the Act and illegal. It was a transaction expressly forbidden by the statute. The jury found that the insolvency of Young was known to Fox & Howard, and to the creditors by whom the drafts were taken at the time they were taken; that they were given by the bankrupt with intent to create forbidden preferences, and that they were accepted by Fox & Howard in fraud of the Act. This is a transaction expressly condemned by the statute.

It amounts simply to this: the debtor of the bankrupt seeks to protect himself against an admitted debt by pleading a payment or substitution which was in fraud of the Bankrupt Act and, therefore, void. The proposition carries its refutation on its face. Fox & Howard were indebted to the bankrupt, and can only discharge themselves by a payment or satisfaction which the law will sanction. A payment or transfer condemned by the express terms of the Bankrupt Act, cannot protect them.

It is to be observed, also, that when the bank. ruptcy proceedings were begun, Fox & Howard had never, in fact, paid to Burroughs and his associates the amount of the drafts accepted by them. They had simply promised to pay them if there should prove, upon settlement of their accounts with the bankrupt, to be so much money due to him. This presents them in a still less favorable condition. They owe money to the bankrupt. They are sued for it by his assignee in bankruptcy. As a defense, they allege that they have made an agreement with Burroughs and others, with the assent of the bankrupt, to pay the amount of the debt to them. They allege an agreement merely. This agreement has already been shown to be illegal. The assignee, representing the creditors as well as the bankrupt, is authorized to set up such illegality. The bankrupt, perhaps, could take no action to avoid this agreement, but his as signee has undoubted authority to do so. When the assignee sets up this illegality and sustains it by proof of the facts referred to, the whole foundation of the defense falls.

It is well settled that a debtor may pay a just debt to his creditor at any time before proceedings in bankruptcy are taken. It is also true that a valid agreement to substitute another person as creditor may be made, and may be pleaded as a discharge of the debt in the nature